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Tuesday, 7 March 2017

Parallel imports are permitted--unless they are not: the case of SAMSONITE in Singapore


Kat friends Lau Kok Keng and Nicholas Lauw, partners, and Jiamin Leow, associate, of Rajah & Tann, share their thoughts on a recent trademark decision in Singapore regarding the thorny matter of when parallel importation may not be allowed.

Parallel imports are a common concern for trade mark proprietors. As elsewhere, having spent time and money to protect their marks in Singapore, trade mark proprietors do not want to be undercut in terms of price by parallel importers. To the chagrin of trade mark proprietors, however, Singapore has consistently taken the position that it encourages parallel importation on the basis that it is good for consumers. It is therefore rare in Singapore for a trade mark proprietor to succeed in preventing the parallel import of goods, but that is exactly what happened in the recent decision of Samsonite IP Holdings Sarl v An Sheng Trading Pte Ltd [2017] SGHC 18.The main obstacle faced by trade mark proprietors, when attempting to enforce their rights against parallel importers, is exhaustion of rights.

This defence provides that it is not infringement if the use of a registered trade mark is in relation to goods that have been “put on the market” by the proprietor of the trademark with his express or implied consent, conditional or otherwise (the “Exhaustion of Rights Defence”). The reason why the Exhaustion of Rights Defence permits parallel importation is that the Singapore courts have long established that the relevant “market” is the overseas market in which the goods were first traded, and not Singapore. Therefore, if goods had first been “put on the (overseas) market” with the consent of the trade mark proprietor, he can no longer object to their sale if they are thereafter brought into Singapore by a parallel importer.

In this case, An Sheng Trading was a parallel importer that had imported into Singapore a shipment of backpacks bearing trade marks belonging to Samsonite IP Holdings Sarl (“Samsonite”). These backpacks were not produced by Samsonite for sale on their own. Rather, they were produced under a co-branding agreement between Samsonite’s Chinese subsidiary company and a third party, Lenovo. Under the co-branding agreement, backpacks manufactured had to bear at least one each of Samsonite’s trade marks and Lenovo’s trade marks. Lenovo or its authorised dealers would then give away for free the co-branded backpacks, but only in conjunction with the sale of certain models of laptops in China. It was expressly provided that these co-branded backpacks could not be sold or disposed of independently from the sale of the said laptops.

However, some of the authorised dealers had unbundled the co-branded bags and sold them separately to unauthorised dealers, who in turn sold the co-branded backpacks to parallel importers, such as An Sheng Trading, who then tried to import them into Singapore. Samsonite sued, and thereafter sought summary judgment against An Sheng Trading for trade mark infringement, on the ground that An Sheng Trading had used signs that are identical to Samsonite’s registered trade marks in relation to identical goods. One of the defences raised by An Sheng Trading was the Exhaustion of Rights Defence.

The High Court found that there was prima facie infringing use of Samsonite’s trade marks in relation to the backpacks. The High Court then considered the defences raised by An Sheng Trading, and formulated two substantive questions that had to be determined in order for the Exhaustion of Rights Defence to be made out:
1) Were the goods “put on the market”? This requires a determination of what “put[ting] on the market" constitutes.

(2) Were the goods put on the market by either (i) the proprietor of the trade mark; or (ii) with his express or implied consent (conditional or otherwise).
For the first question, the High Court held that the expression “put on the market” must involve the realisation of the commercial and economic value of the trade mark. It refers to the situation where an independent third party had acquired the right of disposal of the goods bearing the trade mark. Such an act includes, but is not limited to, the sale of the goods by the proprietor to the third party. On the other hand, preparatory acts such as offers for sale will not amount to the goods being “put on the market”. The High Court held that the backpacks in question were never “put on the market”.

The court reasoned that the purpose of the goods being “put on the market” is to realise economic value, which in this case was to penetrate the Chinese consumer market, to raise awareness of the SAMSONITE brand, and to boost Samsonite’s reputation by being associated with Lenovo laptops. The commercial value of the SAMSONITE mark would only be realised if a purchaser of the Lenovo laptop received a backpack as a free gift together with the laptop. This of course did not happen, as the backpacks were sold unbundled.

It could not be argued that Samsonite had received any monetary benefit from the backpacks. Samsonite’s Chinese subsidiary did not sell the co-branded backpacks to Lenovo for profit, nor did it receive any profit from any of the sales to the unauthorised dealers. The distribution of the backpacks to Lenovo by Samsonite and from Lenovo to its authorised dealers was insufficient, as these authorised dealers could not be considered to be independent third parties. The authorised dealer’s subsequent sale of the backpacks to unauthorised dealers did not amount to the backpacks being “put on the market”, as the profits were never passed on to Samsonite or its Chinese subsidiary.

Although it was not necessary for the High Court to make a finding on the second question, the High Court remarked in passing that there is express consent when permission has been explicitly, clearly and unmistakably given, whether verbally, in writing or by conduct. On the other hand, there is implied consent when such consent can be inferred from the proprietor’s actions, conduct and/or from the facts and circumstances. The High Court also commented that even if the proprietor’s consent to the first putting on the market was conditional and not unqualified, such consent would still be treated as valid under the Exhaustion of Rights Defence. The High Court opined that on the present facts, Samsonite had never consented to the backpacks being unbundled and sold by some of the authorised dealers to parallel importers such as An Sheng Trading.

As such, An Sheng Trading failed in relying on the Exhaustion of Rights Defence, and Samsonite succeeded in obtaining summary judgment against An Sheng Trading for trade mark infringement. While this case represents a rare situation where a trade mark proprietor was able to enforce his rights against a parallel importer in Singapore, it was only able to do so because the parallel importer had obtained the goods in a rather specific manner. While this case does little to alter the longstanding position in Singapore that parallel imports are permitted in Singapore, it does show that it is possible to successfully prevent parallel imports in exceptional circumstances.

2 comments:

Anonymous said...

"The distribution of the backpacks to Lenovo by Samsung and from Lenovo to its authorised dealers was insufficient, as these authorised dealers could not be considered to be independent third parties."
Wait, Samsung ???

Neil Wilkof said...

Oops! Anonymous, you are so right, it should be, of course, "Samsonite".

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